(Recasts, adds quotes, details about company relationship,
divisive issues, previous NEW YORK)
By Kristen Hays and Erwin Seba
HOUSTON, March 16 (Reuters) - Royal Dutch Shell RDSa.L and
Saudi Aramco announced plans on Wednesday to break up Motiva
Enterprises LLC in a deal that ends a partnership of nearly two
decades and hands control of the biggest U.S. refinery to the
Saudi state oil giant.
News that the two energy companies will divide assets in
their oil refining and marketing joint venture had been expected
by many as they navigated an often-frayed relationship where
their respective interests sometimes diverged.
An early sign of a pending breakup emerged last summer when
Motiva announced plans to set up its own oil products trading
operation separate from Shell. The desk started up in January.
The divorce also comes as the Saudi government considers
selling shares in the world's largest oil firm.
Abdulrahman Al-Wuhaib, senior vice president of downstream
at Saudi Aramco, said in a statement on Wednesday that the joint
venture formed in 1998 served the partners' downstream business
objectives "very well for many years."
"It is now time for the partners to pursue their independent
downstream goals," he said.
A U.S. spokesman for The Hague-based Royal Dutch Shell said
the breakup and split of Motiva's assets were consistent with
Shell's plans to simplify its global portfolio.
PROPOSED BREAKUP TERMS
Motiva's three refineries in the U.S. Gulf Coast region have
a combined capacity of over 1.1 million barrels per day, located
within a 120-mile (195-km) radius of one another. The marketing
operations support a network of about 8,300 Shell-branded
gasoline stations in the Eastern and Southern United States.
The partners said that under the terms of a non-binding
letter of intent, Aramco would take over the Port Arthur, Texas,
refinery and retain 26 distribution terminals as well as the
Motiva name.
It will also have an exclusive license to use the Shell
brand for gasoline and diesel sales in Texas, the majority of
the Mississippi Valley, the Southeast and Mid-Atlantic markets,
it said.
Shell will solely own the Louisiana refineries in Convent
and Norco, where it also operates a chemicals plant, as well as
Shell-branded gasoline stations in Florida, Louisiana and the
Northeastern region.
A Shell spokesman said the company would move forward with
Motiva's plan to integrate the Louisiana refineries to operate
as a single 500,000-bpd plant. TENSION
While sources close to the situation say the relationship
between Shell and Aramco has been troubled, that tension grew
after an ambitious $10 billion expansion of Motiva's flagship
Port Arthur refinery. The project doubled its size to 603,000
barrels a day and surpassed Exxon Mobil (NYSE:XOM) Corp's XOM.N Baytown,
Texas, plant as the country's largest.
A disastrous leak of caustic fluid in a new unit crippled
the plant shortly after top executives from Shell and Aramco
unveiled the expansion in May 2012, upping the cost that already
had ballooned from $5 billion.
"That was a continuation of the bad blood," said a person
familiar with the relationship.
In February 2014, Motiva hired Dan Romasko, who had been the
top operations executive at refiner Tesoro Corp (NYSE:TSO) TSO.N , to
replace former top Shell trading executive Bob Pease as chief
executive.
Romasko told Reuters in an interview a year ago that Motiva
was "coming into its own" after the company announced plans to
integrate the two Louisiana refineries.
Sources familiar with the relationship also said Aramco was
said to be angry at Shell when refinery workers at the three
Motiva plants went on strike in early 2015.
Shell led negotiations with the United Steelworkers union
representing the workers, and the strike ended three weeks after
the Motiva walkout.
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FACTBOX on how Motiva's assets will be divided up
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